A failure trichotomy in knowledge exploration and exploitation

In this article, we review current rationales for policy intervention in innovative activities. Focusing particularly on market and system failure rationales, we disentangle related underlying mechanisms for knowledge exploration and exploitation. We provide a novel contribution to the system failure literature by distinguishing between system-level inertia and inhibited emergence. Our conceptualization of inhibited emergence draws on literatures related to neo-institutional sociology, the social construction of technology, and on organizational cognition and learning literatures, and it presents elemental socio-cognitive mechanisms that influence and direct knowledge exploration and exploitation in innovation systems. We compare related, yet theoretically distinct concepts of market failure, system-level inertia, and inhibited emergence, and show how each addresses distinct coordinative mechanisms and field-level dynamics and related socio-cognitive processes.

► We review current rationales for policy intervention in innovative activities.
► Focus on market and system failure rationales.
► Underlying mechanisms for knowledge exploration and exploitation.
► Distinguish between system-level inertia and inhibited emergence.
► Socio-cognitive mechanisms inhibit emergence.